Why It Matters

In a presentation to reporters yesterday at a golf resort on Silicon Valley’s Sand Hill Road, Samsung president Young Sohn announced that his company plans to invest $100 million in research projects and businesses aiming to solve important technology problems. Seeking to demystify its sprawling business, Sohn said the South Korean company’s latest investing activities would be centered at a new “Samsung Strategy and Innovation Center” just across the street, near Stanford University.

There’s no doubt that U.S. consumers are taking more notice of Samsung, which, according to Strategy Analytics, an independent analyst company, shipped 30 percent of the smartphones sold around the world last year. But the company has sometimes suffered from the perception that it follows technology trends rather than leading the way with important innovations.

By 2020, the world’s biggest mobile device maker plans to more than double the $188 billion in revenue it made last year annually and become one of the world’s top five brands. And it is hoping America’s top technology talent will help it shed its reputation as a follower.

The new $100 million “catalyst” fund will augment $1 billion that’s already under management within Samsung Ventures America that invests in startups at all stages. The goal of this new fund is to boost unproven technologies related to “components and subsystems” across the many devices Samsung sells. University researchers, for example, could get funding. In fact, Samsung is already considering writing a check to a high-profile academic in Wisconsin, Sohn said.

A motive driving Samsung’s investments is a desire to break through some fundamental barriers and unknowns in order to improve the “supercomputers in our hands,” as Sohn described modern smartphones. While some mobile technology advances are predictable—say, the move from 4G to 5G data networks by 2020—the path forward in other areas is less clear, he said. Technologies that address limited mobile battery life and weak device security, or lower the cost of a device and advance chip architecture, are among those of particular interest.

Of course, venture investments are nothing new for Samsung, nor are they for other research-focused companies in similar industries, such as Intel or Google. Last year, Samsung invested its capital in 20 deals worth $160 million, Sohn said. It also bought key startups, such as a Santa Clara–based data caching company called Nvelo.

But the company thinks it can have a broader impact by funding fundamental research.

“We believe that a number of venture companies have moved away from basic science and technology that takes a long time to incubate and develop. Samsung has decided we want to step in,” Sohn said.

The strategy represents a turn outward for Samsung, which spent more than $10 billion on R&D last year and has more than 60,000 R&D employees around the world. The company will bring technology fellows from Korea to rotate through the new center and take ideas back to headquarters. It will also beef up its presence in Israel and other technology hubs around the world.

At the event, Sohn also showed off his own Samsung phone. Not too long ago, having started at the company only in August, he was still using an Apple device, like many who work in Silicon Valley’s technology community (see “Why Samsung’s Man in Silicon Valley Uses Apple Devices”). “Once you get used to the bigger screen, it’s hard to go back,” Sohn said of his new gadget. If the new fund is a success, he may have a good reason to hold onto it.